First Wal-Mart. Now Microsoft. There is, it seems, no global giant that Tesco is not prepared to take on.

While a new division of the UK's biggest grocer is currently working on a £250m plan to open 150 supermarkets in the mighty Wal-Mart's US backyard, the supermarket chain is also about to launch a range of own-brand software that will compete head on with the company whose products are loaded into 95% of the world's computers.

Tesco is aiming to substantially undercut Microsoft, offering software titles for less than £20. It claims to be the first retailer to offer a range of own-label software, taking the same approach to the world of technology as grocers have traditionally taken to baked beans and soap powder. The initial range includes an office suite, two security/anti-virus products, a personal finance tool, CD/DVD burners, and a photo editing product. Microsoft Office sells for up to £300.

The Tesco software will be available in more than 100 Tesco stores from this month, with plans to roll out the range across the UK over the coming year. It will complement Tesco's entry into the computer hardware market earlier this year.

Tesco is also offering a full support package via a special website, TescoSoftware.com, where the products will also be sold. Tesco buyer Daniel Cook said the new range of software "is bringing choice and value to a market which has offered little of either for too long".

This week Tesco is expected to announce half-year profits of more than £1bn for the first time - only four years since it first made £1bn in a full year. The chain, which now has 31.5% of the UK grocery market, plans to increase its UK shopfloor space by a quarter this year and will double its presence overseas. It has operations in 12 countries outside the UK, from Ireland to South Korea, and will open in the US next year, in California and Nevada, under the name Fresh & Easy.

In the UK Tesco has nearly 1,300 stores, ranging from convenience outlets to hypermarkets. Much of the improvement in profits stems from non-food sales, as it makes further inroads into the clothing, electricals and furniture markets. With the big grocers currently under the scrutiny of the competition commission and the UK food market fast approaching saturation, the supermarkets are increasingly looking to new avenues for sales growth.

Tesco's clothing brands are among the fastest growing in the fashion market and last month it announced a drive to sell big ticket furniture and electrical goods through a catalogue and on the internet - challenging the dominance of Argos. Tesco is offering 8,000 items, from sofas to golf clubs.

The software has been developed by a company called Formjet, based in Cambridge. Formjet's products, largely centred around a system called Ability Office, are regarded as good attempts to clone Microsoft's dominant suite of Office programs, and are compatible with the Seattle-based giant's systems.

But while Tesco is hoping to appeal to mainstream customers, most home users will already have the equivalent Microsoft products installed on their computers.

However, it is internet security where the supermarket chain may feel it is able to make the strongest challenge to existing players. With greater public awareness about viruses, hacking and internet crime, computer security is becoming an increasingly valuable industry, worth up to £8bn worldwide this year, according to research.

Microsoft, which recently launched its own OneCare Live product, will be one of several challenged by the announcement, but other vendors - including Symantec, Kaspersky Lab and McAfee - will also be in Tesco's sights.

The arrival of supermarket brands into software is the latest mark in a rising tide of companies attempting to challenge Microsoft's dominance. While alternatives to Microsoft's programs and services have been available throughout its decade-long grip on the PC world, it is only in recent years that viable challengers have emerged. The Firefox web browser is now used by around 12% of people around the world, while search giant Google appears to be building its own suite of free-to-use products. Microsoft has spent years battling regulators in Washington and Brussels.

The software giant has also been slow to recognise new trends. It came late into the video games market, where its Xbox still trails the Sony PlayStation. It lost out to Google in the lucrative online search market and is playing catch-up to Apple's iPod in digital music.

How store conquered all

1919 Jack Cohen started the business selling surplus groceries from a market stall in London's East End and making £1 profit from £4 sales on his first day.

1924 Own-brand products started using TES, the initials of a business colleague, and CO, the first letters of Jack's surname.

2005 Announces £25m home shopping service for 8,000 goods, including furniture, bikes, cameras and sports equipment in a direct challenge to rivals such as Argos. But computer glitches in September delay the launch by several weeks. Martin Wainwright